Standard & Poor’s downgrade of Japan’s credit rating sent a shudder through markets on Thursday. That was followed, as usual, by the more sober realisation that what rating agencies say about the nation’s creditworthiness is nearly irrelevant. Since Japan sells 94.5 per cent of its debt domestically, what really matters is that the public sector keeps the faith of the private sector. So far, it has done so. Bond auctions continue to be well covered. Yields are rising, but still low.

This market confidence does not mean that S&P’s judgment is incorrect. The rating agency could have picked any number of triggers for its first cut in nine years: Japan’s pushing gross government debt to Y5.2m ($63,000) per person, higher than the average disposable income of a working family, or the apparent inability of any politician to talk about tax increases without spooking supporters.

There are also less obvious cues: the steady thinning out of the labour pool (immigration could mitigate the declining native population but the number of foreign nationals dropped last year for the first time in 48 years); or the fact that Japan has become a net importer of consumer electronics, suggesting that its balance of trade is shifting toward deficit territory.